Take yourself back to mid 2008 for just a moment. The great recession was in full bloom. Friends and relatives were losing their jobs. Hours were being cut back. Company 401K match contributions were being canceled. Insurance co-payments were being raised. Pensions were being eliminated. Employees were putting up with it all because they had to.
Fast forward to time now. While unemployment remains around 10%, companies have started to hire. Consumers have started to buy. Industrial orders have increased. The word “career” has crept back into our vocabulary. My college nephew even got a summer internship.
Why did companies and management do all those things over the past few years? Because they could! Employees did not have a choice. The power in this relationship is about to shift and employees are going to remember those decisions. While the definition of compensation may have changed, the way teammates were treated during hard times will not be forgotten. It’s payback time. Those unilateral decisions over the last two years are going to be paid back over the next ten years through attrition as teammates get options again.
Did you and your company play the game for the long term or take advantage of the temporary shift in power over?
Sunday, May 16, 2010
It’s Payback Time
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39 comments:
John,
I agree with the sentiment of your message. I also agree that the effects you listed would normally occur. However, I believe that the behavior of companies has scarred the overall consumer market so badly that it will take several years for sustainable demand to recover to the point where employment confidence is also stable and sustainable. I believe that employees' feelings of retribution will remain pent-up until they are very sure that they are safe in acting upon their feelings.
I hope I am wrong. Some companies have conducted themselves very honorably during these tough times and they deserve the positive recognition and competitive advantage.
John, I hope you are right. Yes, my job started to decline in mid-2008, as the pressure to perform became intolerable for most people on my program. Lots of finance employees on my program left the company for greener pastures with less pressure. My program developed such a negative reputation amongst the company finance employees, it became difficult to replace the people who left. Those of us who remained were treated as potential traitors who were about to jump ship. Management focused on every tiny fault and blamed the most defenseless people on the program for the program's ills. Now it is 2010, and I'm unemployed, but I'm still hearing that the program has a very negative reputation within the company and fear is running rampant throughout the finance team.
A lot of people have asked me why I want to work for that company again. I tell them it is because of the ethics. The program I worked for is just one of possibly thousands of programs within the company. A different program, a different business unit, and a different location; everything might be different. It is worth taking a chance that 2010 will be a better year and I could find a better job.
Hi John.
You are so right! This Towers Watson study on engagement:http://www.towerswatson.com/global-workforce-study and all of our anecdoctal experience in the field suggests that the magnitude of the anger, frusration and mistrust workers (and customers) are feeling will have a profound effect on the economy and work-life experience for a long time.
Yes it is tough out there. But I don't see it any different today. I lost my job in 2009, while I did some temp work, I have found the market to be just terrible. I have been told I have a great background and experience, but no job. There is no sign of it picking up. I need to get back to work -but bottom line - no one is hiring. So insurance cutbacks, pensions and 401K decreases would be nice to experience at this point since that would mean I would have a job.
I invite you to review my profile. Any help in networking or in leads on jobs would be appreciated.
Thanks,
I've had the opportunity to connect with upper-level management in a few large companies. It occured to me as I read your post that the companies whos business is based on integrity, as Chick-Fil-A & Disney, those who know the value of their employees, they never had a recession. They were, and still are profitable.
I'm assuming your point is that we should expect a less-than committed work force in the near future and to expect a lot of "job jumping." This is bad that it will cause a decrease in profits as re-training costs increase, but also good that many jobs will become available and compensations should begin to increase to maintain valuable employees.
Hope you are doing well. I enjoy reading your update and discussions. As to your question, I would have to say that our company's response over the past few years has been a bit mixed; not too bad on headcount, but pretty tough on work environment.
For that (and other reasons), am confidentially looking for a new role that integrates my growing knowledge base within sustainability. Ideal roles would be Director of Sustainability or a Supply Chain role with heavy focus on Sustainability. Willing to relo. Let me know if you are aware of potential opportunities through your network.
John,
While I agree with you that employees are not going to forget the way they were treated the past couple of years, especially after hearing "our employees are our most valuable asset" for the preceding years leading up to this economic mess, I think the worst is yet to come.
On Tuesday, the Congressional Budget Office said the government health care bill will cost taxpayers $115 billion more than what was stated in March. The bill now costs over $1 trillion. But there is more bad news for employees with company paid health insurance. Four major U.S. employers (AT&T, Verizon, Deere and Caterpillar) are considering dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government. These companies currently offer health benefits to over 2.3 million employees.
Non-partisan experts have predicted for months that millions of employees will lose their health insurance as a result of the new law. Just last month, the Administration’s own Medicare actuaries released their analysis of the legislation warning that 16 million Americans will lose employer-provided health insurance.
How/why is this happening? The way the new law is written it is much cheaper for many employers to pay the tax penalty than it is to offer health insurance to their employees. For example, AT&T spent $4.7 billion on medical costs but would have been taxed a much lower amount ($600 million) for not offering their 1.2 million employees, retirees, and their dependents’ health care benefits – a savings of $4.1 billion for the company. Go figure.
The anonymous poster looking for a Director of Sustainability or Supply Chain sustainability gig can contact me:
s.wisler@ecoinnovationpartners.com
www.ecoinnovationpartners.com
apologies for this off-topic post, but reaching the person is difficult because they are, well, anonymous.
In August 2008 I was a senior exec in a boutique turbomachinery design engineering services company, and we were bought out that month. In 2009, the new company cut our salaries 10% in a response to market conditions. In what I thought was a remarkably brazen approach, they announced that the reason was to build a slush fund for strategic acquisition of companies that would soon be struggling in the down economy. They had read an article on being agressive in down markets, and this was their approach. I resigned in September 2009, and this surprised them. Aerospace is now starting to open up slightly and highly skilled technical people are starting to leave. There is a lot of pent up discontent that I think they will have a difficult time patching up. Integrity is as important in down markets as in bull markets.
The "leadership" in American Family Insurance's Education Division used vendettas to "displace" employees in the fall of 2008 as part of a so-called reorganization, while leaving an equal number of positions unfilled. Since then, the Division has struggled with fulfilling even the simplest of requests, because a lot of the brain trust was jettisoned in that upheaval. It has gotten so bad, other Divisions have been openly performing employee training themselves, completely cutting out the Education Division, and have pointed out to the the Division's "leadership" that if they would do their jobs, the other Divisions wouldn't have to do it for them.
Of course, upper management at American Family Insurance all have the same "deer in the headlights" looks on their faces, and their lead bimbo cannot for the life of her understand WHY they aren't getting listed on Fortune's "Top 100 Places to Work." Let's see, hide behind a reorganization to dump employees because a few bad-apple managers decide to launch a witch hunt, drop over 400 contract I/S employees in the span of 8 months, affecting every single technology-related project in the company, give massive bonuses to top management even though the company posted losses several years in a row (culminating in a $297 million loss in 2008 and a drop in it's rating) while denying employees any sort of raise, and, in a nod to Dilbert, decrease the size of individual cubicle "pens" to squeeze more employees onto the available floor-space.
Oh, yeah, the payback is coming. And when it hits, they won't know what hit them.
I just landed a position with Eaton Corp and I am excited about the future. I hope the economic shift upward will hold true for the long run.
Cheers
Thanks for the great posting John. However, as a political scientist , I believe this is a weak argument due to the advantage owners of production have over labor in America as compared to other OECD countries. Sikorsky workers belonging to the global work force are probably aware of the inferior level benefits an American worker receives as compared to their European and Japanese counter parts. Ironically, most European workers, especially in Italy for example, enjoy more social and work benefits from the large American defense umbrella, which has allowed their governments to fund more programs like health care.
While America is going bankrupt funding unnecessary military programs like pilot-less Black Hawk helicopters and bailing out the rich politically connected Wall Street investment firms, the average American worker will continue to get the short end of the stick. Money talks the loudest in America’s political system and until the money is removed from the political system, labor legislation will still favor the owners of production.
While your precept is correct (Employees did not have a choice.), your message is damaging in my opinion. Companies and management, including my own, did what they did largely to survive. Yes, they had the power to do it but that power alone was not a sufficient reason for doing it. Revenue for companies was being reduced by the recession and when revenue goes down you'd better reduce expense or you will not survive. While the change in fortunes does indicate a change in power the worst attitude one can have is that it's "Payback Time". That serves the employee, at best, very temporarily while they hold the power. But the power will shift again and those employees with the bad attitudes are usually the first to go. I have seen that happen time and again in these cycles. An attitude of gratitude leads to harder working employees with more pleasant dispositions and that leads to greater stability and employability. While it is not full proof, it is certainly not the recipe for discord that "payback time" will almost certainly result in.
This comment from Paul is typical from the Democratic left in this country. The only thing missing from his comment is that he missed an opportunity to criticize George Bush. The ecomomic system he admires in Europe is what brought the crisis to Greece and has Spain and Portugal in trouble. What about the unemployment rate in Europe? I don't know about you, but I don't want to give 60% of my income to the Government to spend as they see fit. Lets hope the November elections will bring this country back in line with what our Founders wanted and a withdrawel from the current trend of Government's intrusive involvement in our daily lives. It is apparent from the writer that he is not an admirer of the capitalist system which made this country the greatest in the world
Hi John,
I was at a Big 4 Accounting firm, who took advantage of the power shift and downsized a number of folks. And while it was stressful at the time, it was a great thing for me personally. Not financially. Stopped traveling, and learned to focus on my needs and less on theirs. I fully learned the concept I had told staff decades earlier. "Work can be a cold mistress."
But I think the overall job market is more reflective of America as a whole, and that is not at all encouraging. We have lost a lot of consistent thought and applications. If now we are angry at Employers, why are we not also holding Sports Players and Entertainment folks accountable? How is it that Charlie SHeen, and Lindsay Lohan, got all their money? And why do we continue to fuel those excess but hold a Big 4 firm accountable for their excesses, or Wall Street, or Big Oil, or Big Pharma, or the like. It just seems that we are angry at entities and not individuals. Did hockey lose anything of fan support after a whole season lost? Do Folks still go to Yankees stadium (Huge fan here), even if the seats cost $300 a piece a game for the lower deck near home plate (or more)? Yet folks will boycott WholeFoods over conventional olives?
Its erratic behavior. And so, is the job market at present.
With changes in laws about Healthcare, and the like. Company benefits are increasingly being leveled out. And I think that is by design. And yet that is also erratic. "Cadillac plans" for union workers will not be taxed, but the same plan for non-union workers, will be taxed. If everyone is in the same workforce, how can that not further divide the nation of the haves and haves not.
And so, I see it for the Job market. In my dream Job, I'd want to be Bobby Flay. But that's not reality. In the real world, I work to pay my taxes, my mortgage, get sometime with my fiancee, and new puppy. I go to church, and sleep well, knowing I'm doing ok. I'm not a rock star, and nothing else is exceptional about work or my package. But you know, not everyone can be the CEO of United Technologies.
I'm not looking to dole out a payback. I'm more old school and just want to meet my needs and pay my bills, and hopefully have enough for a dinner out on occassion, and to be able to spend time in my garden.
I also am reminded of a phrase I've shared with countless staff. "Work is what I DO, its not who I AM."
I believe that the power shifts back and forth and that each side plays their hand when the pendulum swings in their direction. When it is a good market for labor, the employee has no problem asking for a larger raise or increased benefits (whether or not the company has taken anything from you in the past). When your particular skill set is in high demand, you ask for more. I think that a recession is more than just the typical swing of the pendulum, but I don't see that employees will want to "payback" the employers for their actions at that time. I think that when the pendulum swings, employees will do what they always do - maximize their earnings and benefits to the extent possible. I don't want to suggest that the relationship is therefore antagonistic between management and employees, but maybe more of a capitalistic relationship at the macro level - each "company" trying to maximize their profits while providing a valuable product or service to the other.
As a political scholar in national security and American foreign policy, I am well versed in the Federalist Papers and what the founders of the American Republic wanted for their new country. A large central government ruled by increasingly wealthy individuals is not what Federalist authors Alexander Hamilton, John Jay, and James Madison would have supported. Even the creation of a large standing army and a permanent armaments industry is something all the founding fathers of this country would undoubtedly be against. Supporting this argument that the founding fathers would not support the large standing army we have today with more mercenarily soldiers every year is taken from what Alexander Hamilton Federalist # 24 and Federalist # 26 among other papers concerning the military and a standing Army. In the closing paragraph of Federalist # 26, Hamilton appears to endorse the idea of what would be today be considered a military draft. This analysis is based on the following section written by Alexander Hamilton and published in the Independent Journal on Saturday December 22, 1787.
“But it is an evil infinitely less likely to attend us in a united than in a disunited state; nay it may be considered that it is an evil altogether unlikely to attend to us in the latter situation. It is not easy to conceive a possibility that dangers so formidable can assail the whole Union, as to demand a force considerable enough to place our liberties in the least jeopardy, especially if we take into our view the aid to be derived from the militia, which ought always to be counted upon as a valuable and powerful auxiliary. But in a state of disunion (as has been fully shown in another place), the contrary of this supposition would become not only probable, but almost unavoidable.”
Not influenced by the corporate mass media cocoon of ignorance and fear and having an advanced education in political science, I have a advanced level of understanding of the political economy and the Federalist Papers. I am not a democrat or a republican. I am an American voter.
The main point of my previous posting is that there are consequences of being a hegemonic power and a country with over 800 military bases around the world. Living and working in Italy for five years, I saw how these military bases help contribute to the economic and social welfare for Italians, while people living in Connecticut face budget cuts and school closings.
If the leaders of Sikorsky and other leaders of American industry were serious about the long term economic prosperity of the United States, than companies like GE, Sikorsky, and Boeing would be creating new mass transit vehicles running on alternative sources of energy. A new American high speed train and similar mass transit vehicles built by American workers for Americans to use in their own country, would undoubtedly be something the founders of the American republic would have supported. In turn, these mass transit vehicles could then be exported by America to other developing economies.
John,
at the senior level, once you have provided what they needed to get out of a bind, the employer seeks to replace you with a lower cost employee. Perhaps we need to be more selective in who we select as employer, or we must face the facts that our skills are undervalued and discounted.
All persons are not equal, but HR thinks that an MBA is an MBA, an engineer is an engineer etc. Payback? It's all in the negotiated pay to begin and plans to move forward to the new options when it's time to move on.
Frankly, employers want it that way as the perks of retirement responsibility linger for decades after a full term employee retires with full benefits.
That "on the books" liability for pension benefits stymies mergers and buyouts when companies sell or refocus their businesses. It's the way the world is. So forget about any long term pension plan and carve out your fortune and fate on your own terms. [or work forever]
Don, I can agree whole heartedly with your comments. Although I do believe one should be cautious in wielding their power when they have it. During the Dot Com Bubble of the late 90's there were a lot of tech employees who profited wonderfully by jumping companies to rachet up their income dramatically. Those same employees became almost unemployable when the bubble burst because they were seen as too expensive. Discretion is not just the better part of valor -- it is the better part of business.
As an Industrial Psychologist my view is simple- organizational employment as we have been socially conditioned to believe is over , i.e. the American model of get a job and they will offer you a nice health plan, pension plan,educational benefits and of course a steady salary are over. The days of the 40+ years of employment and gold watch retirement (outside of the Aerospace sector) are gone. Even within the aerospace world it is finally changing. We are essentially employed at will and should not have any expectation of lifetime employment. As far as things turning around in favor of employees, good employees with specific talents and skills will always be sought after, but we need to market ourselves more like Major league baseball players as we are all free agents in this world of work. Hope this was insightful.
John,
I agree with you, it is the payback time.The employees are always vulnerable groups even there are very powerful labor unions in USA, because the companies occupies the resources for allocation. Under this situation, the rational companies will firstly keep their own benifits with no doubt. Should we thank I believe is the recovery of global economy, with which companies have additional biscuit crumbs for employees.
While, is the global ecomomy really reovered? I prefer remaining a big quesiton mark here. Now the biggest economic problem of US is the national debt which is different from China (income/resource allocation). Considering the impact caused by the debt crisis of Greece, we need keep an eye on it. And that is why USA government put big pressure to euro main countries to help Greece.
If the debt crisis of Greece could not be solved quickly, it may be spreaded to USA, and the big bill of health care reform will be additional and critical challenge.
Bravo, Fred!
Well said. If more of us would have the same attitude, we'd all be much better off.
GV
Hi John,
A personal reflection on this:
Not the first dip that I have seen. And not the first time that both companies and individuals make the same mistakes.
Companies in mixing up the long and the short term. And sometimes making enemies of the 'select group of' people they need most. In the general sense the majority of people appear to have 'short' memories. Which means that companies can make mistakes but do not suffer as much as one might expect.
I was recently called by a headhunter for a position at a major US company. The package was very good I have to say, better than before 2007. But this gentleman told me he had big problems in getting the right people interested. Most of them were working at smaller independent companies or as independents. He needed about 40 people but after 1 month only got 1.
Well stated, Paul !
Great posts...
Amazing, top executives being paid big bucks, haven't learned that cheaper isn't always better. I suppose this is another example of paying the most, doesn't necessarily get you the best.
Even as a UTC employee I did have a choice - I decided to leave Pratt in 2007 and start a one person company. And while I also decided to cash in my entire UTC 401K as an investment in myself rather than wall street (fortunately before the crash), 2-1/2 years later I'm still kicking and have some FAA and NASA work that promises to expand. I pay myself a fraction of what I made at UTC but am having twice the fun and many times the impact, despite the sometimes intense pain of doing a start-up during the great recession. We all have a choice in the long run, it's simply a matter of how much risk you wish to take to achieve what you want to do in life. It's not for everybody, but for me it was the right move regardless of whether I succeed or fail. I have no regrets and do not miss the silliness of corporate America's culture and the tendency of its financial leadership to hollow out the company's employees, products and services in the name of shareholder value. In the end a dollar is only an exchangeable measurement of a unit of work, and it only has value when everyone agrees it has value. Focusing only on the financial metric as the means to measure the efficiency of a complex system such as a business, market or economy is foolhardy and one dimensional. When too many people game the system they suck too much energy out of it, hence initiating a partial collapse, as we've seen on wall street (it's also what lead to the American Revolution in the first place). It's time to get back to the basics - exceptional customer service, exceptional product, and manufacturing here at home so we can derive the community benefits locally. And you need employees who are lead - not commoditized - to achieve it. If we do these things right in a responsible manner, the finances and profits will come and the economy will return. If we don't, nobody will believe in the value of a dollar anymore and we will have total chaos. Ask the Germans in post WWI (or the Greeks today).
Amazing, top executives being paid big bucks, haven't learned that cheaper isn't always better. I suppose this is another example of paying the most, doesn't necessarily get you the best.
I couldn't agree with Clarence more! As for John's original comment, not true. The word “career” for me will be lost soon being a Pratt & Whitney Cheshire employee. We never really saw a reduction in work over the past couple years. Actually last year was our best ever, with June being the best ever and then a month later they decide to close us? We are still busy. Even with the devastating news of the closing of Cheshire, we are still working our tails off and getting OUR customers engines out. Pratt may be paying out paychecks, but the customers are our real employer. Now if that isn't a dedicated workforce, then I don't know what is? The 40% reduction "expected" for this year never happened. I remember being told "Cheshire has a strong future and is becoming a benchmark facility in our global overhaul and repair network". We have always been known in Cheshire as "the best overhaul and repair facility in the world", and I know we still are!
Both of you are spot on!
One of my favorite blogs, Management by Baseball, uses baseball as a metaphor and example for business lessons. A recurring phrase in that blog is "the talent IS the product". Unfortunately, as Rod points out, for many companies -- even A/E and consulting firms -- the talent is instead viewed as a commodity. I certainly hope that as the economy picks up more companies start to take the longer view, not only for my sake but for the sake of our entire economy
Just like people, companies have values. Whether stated or not, they exist and the company culture will live the values that senior management drive to. When choosing a company to work for its important to get an understanding of those values and figure out whether they match what you want. If the company has a history of mis-managing talent for instance, its a good indicator that valuing people and individuals is not a value for the company. This, of course, might mean that when you find this company you might need to take a lower position at a lower salary to get into a company that has the right values and build yourself up there over time. Although in the short term that might seem like a bad deal, if you AND the company are in it for the long term then you'll be in better shape in the long run. To me people that jump from company to company in order for the highest bidder are as bad as companies that view people as meat. What I'm really afraid of is... the companies who have good values, and the people with good values are on the decline.
My defense company treated me well in terms of compensation, but there is more pressure now for results/revenues.
Unfortunately, I think fundamental economic trends that pre-date 2008 shift the balance of power to the corporations. More workforce competition is being created internationally, for example. Companies are outsourcing more high skilled positions, not just manufacturing jobs.
Our collective retribution will be tempered by these forces as well as the slow pace of "recovery".
I took note of your article not just because of the title, but also in that you are a UTC employee. This American has been around the block (even worked with your Pratt-Whitney people on the IL-96M and missed an opportunity with OTIS in the '90's) and I beleve that while in the short-term there could be changes, in the long-term there will not be much difference in corporate America's behavior. It's not much different in Europe:it's a cruel world and your best chance for survival, self-esteem and steady income is to have and run your own company. You just need some money, some savvy and good health.
I expect the pattern will be very similar to the crash after 9/11. LTAs ensued in fervor in 2002 with year over year pricing decreases that were typically unfavorable to Supplier margins. By 2005-2006 the Suppliers that buckled under the pressure or undercut the competition to win market share were suffering greatly as they did not have the capital to increase capacity and hire more people to meet demand. Many had more work than they could do and on-time delivery and quality suffered. Sub-tiers in metals and casting/forging houses were particularly vulnerable. Now is the time to consider capacity enhancements through automation and Lean in preparation for the recovery. Well developed, scale-able, and agile Suppliers will do the best in the next cycle.
I think part of the problem lies with the fact that, at least with HS, the primary US facilities are located in CT, IL, and CA. Only Michigan has a worse business-killing tax strategy.
I agree, however, with John's original comment pertaining to "why" many companies did what they did (simply because they could). One interesting element in Aftermarket is the fact that the suppliers are far more profitable than many of the end users (struggling airlines).
To the original intent of the post, assuming we make near a full recovery in the coming year or so, I definitely anticipate there to be what John describes. HR people call the period coming out of a recession a "resume tsunami"; many disgruntled employees fleeing upon the first opportunity.
My feelings pertaining to UTC -- really HS and even still with my very limited scope HS Rockford are the same regardless of a recession. I think HS/UTC is and has been a great employer in many key areas - primarily ESP and other benefits. What I do see is a major problem with both age and heavy workplace politics. On age, there is a disproportionately large number of people that have been there 25+ years. There are very few 30 to early 40 year old employees, and a fair amount in their 20's. The politics I won't get in to much since I do work at HS, but it is definitely a source of frustration for people that don't have their entire family employed at HS and were perhaps naive enough at one time to believe that stellar performance and a positive attitude were enough to move ahead.
Hi John. I think you have not received a response to date because you are asking the hard questions which can sometimes bring silence. Fundamentally, I believe there is a shift that is occurring in how employees view career opportunities both now and in the future. I think this shift is a result of a longer period of time when pensions and dreams of staying with an employer for an entire career have become a thing of the past. More professionals are exploring their entrepreneurial potential where they can market and sell their skills which is evident in the growth of smaller business sector. I recently read an article in the KC Star by Diane Stafford, "Flexibility keeps workers around" - KansasCity.com, where it is noted that work life balance may be the key to retention in the coming years. The ability of companies to bring about change within their organizations will continue to be the key for growth and survival for any company in the future. I don't think this is any different that what makes a company successful today, but more of these corporate soft skills are going to be a key undoubtedly for retention and diversity in the coming years. Thanks for the thought provoking question.
John,
Having read this comment I am a bit confused with regard to the theme here? Are you saying by in large during this recession companies when faced with financial difficulties took advantage of their employees by laying people off, wage cuts, and the like?
There is a term called a remembered hurt and it willl last a persons career life time. I do hope managers of employees remember the way they treat thier employees during tough times can create a remember hurt that can hurt the bottom line of the company for many years into the future.
They have tried that here, but we still keep pushing the engines out the door and are still making a big profit according to management. We all have a job to do, but no matter what the company does, people need to remember it is the customer that keeps us all here. Trust me, it has been a rough year for all of us here, but the job keeps getting done.
I spoke too soon!
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